Can women get venture capital funding? The arguments on both
sides are equally persuasive.

Venture capitalists say they consider profit potential, not
gender, when looking for deals. But despite this apparent
neutrality, women only got an estimated 4 to 5 percent of the $38
billion invested in the United States in 1999.

"More women are being funded today, and there are a number
of highly qualified women seeking funding, but relative to the
total market, the numbers are small," says Willa Seldon,
general partner with San Francisco-based Viridian Capital, the
newest SBA-backed small-business investment company (SBIC)
targeting women entrepreneurs.

But, Seldon adds, the numbers are improving. She attributes the
change to several factors: women entrepreneurs being
better-prepared to seek capital, more venture capitalists looking
to fund women and more women working at established venture
funds.

Sharon Hadary, executive director of the National Foundation for
Women Business Owners, views the discussion as a sign of how far
women have come. "When we first started, we worried about
issues like banking relationships, access to credit and
[convincing] banks that a woman-owned business is viable," she
points out.

Acknowledging that the market is still clearly under-served,
Hadary speculates that preparation is part of the problem. She
believes that while some women have the management teams and skills
financiers like to see, most don't.

Another obstacle is that most venture capitalists only look at
proposals recommended by people they know, and "a lot of
venture capitalists don't have women entrepreneurs in their
circles of friends," says Kay Koplovitz, CEO of New York
City's Koplovitz & Co., a media investment firm. She says
the percentage of women getting equity capital is anemic.

To ameliorate the negative fall-out from fighting the
good-old-boys network, Seldon says Viridian reviews every business
plan that comes its way, but only invests in less than 1 percent of
the proposals.

Another development that may help circumvent women's lack of
access to venture capital is the growing number of women angel
networks. There's no definitive list of these organizations,
but Koplovitz has found networks in cities like Seattle; Boston;
Washington, DC; and Cincinnati.

As more women entrepreneurs move into the ranks of investors,
the amount of venture funding available to women, as well as
women's overall chances of obtaining equity financing, should
increase.

Therapeutic Capital

For the first 10 years of her company's life, Laura Peck
Fennema was content to grow Essentiel Elements using internal
financing.

Then came the decision to add a skin-care line to a product mix
that already included aromatherapy body and hair items sold to spas
and specialty stores. "Launching a skin-care line requires a
much larger budget," says Fennema, 42, of her need for outside
funding. "And we needed to hire our own direct sales force.
That takes deeper pockets."

Going the venture capital route was a natural for Fennema, who
had worked as a technology stock analyst in investment banking for
eight years prior to starting her San Francisco company with
$50,000 in savings in 1989. But even Fennema didn't realize how
naive she was about the process.

"In the thick of it, for three or four months, searching
for venture capital consumed about a third of my time. I was
meeting with people constantly, sending out business plans,
responding to questions and revising my financing," she says.
She eventually ended up with a first round of financing in March
1999--a combination of $500,000 in venture funding and $750,000 in
private equity capital. "I approached only about five venture
capitalists, and when I realized they were going to have to do so
much due diligence to close the deal, I decided to take another
route."

Fennema, who believes the lengthy due-diligence process is the
nature of the venture capital beast, also cautions women to
understand that going to traditionally male-dominated venture funds
can be an iffy proposition. This is particularly true if you're
pitching a deal that might be viewed as a "women's
issue," such as a company only selling services and products
aimed at women.

While Fennema was surprised at the level of intensity required
to raise her $1.25 million in equity capital, she's extremely
pleased with the results--and her 1999 sales of $10 million:
"It has allowed the company to grow pretty
dramatically."